Exploits of E-commerce and forgotten responsibilities

In less than five years, at least 10 e-commerce organisations entered the market offering unbelievably high discounts. The reckless and aggressive business model of these companies, including Evaly, has adversely affected the e-commerce equilibrium.

Does advertising and celebrity endorsement influence our consumption behaviour? If we search the internet, we will find ample research that will establish the fact that both factors not only influence our consumption behaviour but also influence our way of living and social behaviour.

When such advertising is done using credible media, mass media in particular, it changes people’s perceptions of themselves and may even encourage socially undesirable behaviour.

Then the question is, how can we ensure a certain level of ethical standard from the business enterprises when they promote a product or service with a specific promise but fail to deliver on it? Here comes the role of the regulating institutions in protecting the interest of the consumers.

The regulating institutions must act as the watchdog and examine the authenticity of the claims made by them. The regulatory bodies must ensure that these claims are practical, conform to the existing laws and policies, and do not create unhealthy competition.

In less than five years, at least 10 e-commerce organisations entered the market offering unbelievably high discounts. As part of their marketing strategy, they invested heavily in advertising and media spending.

Besides, they also brought in celebrities and young influencers as brand ambassadors. The result of such intelligent but costly marketing gave them the expected return on the investment – an incredibly large customer base and a handful of credit.

According to media reports quoting an inspection report by the Bangladesh Bank, one such company Evaly had a credit of Tk2.14 billion taken in advance from its members and Tk1.9 billion in products from different suppliers.

The report also stated that the total asset value of the company was only Tk650 million instead of Tk4040 million in current assets. Thus the inspection report cautioned a possible downfall.

But who is to blame for this situation? Did the regulating agencies serve their mandate? Two such dedicated agencies, the Directorate of National Consumer Rights Protection and Bangladesh Competition Commission under the Ministry of Commerce, should have acted in advance and come up with an e-commerce policy to avoid such a catastrophe.

The Directorate of National Consumer Rights Protection is mandated to protect the rights of the consumers and raise awareness. At the same time, Bangladesh Competition Commission is mandated to make the market competitive through advocacy, engagement and enforcement of the law resulting in a congenial business environment. Both have failed to act in the first place.

Although the former has been involved in several e-commerce related arbitrations, it did nothing to raise awareness. On the other hand, the latter sat idle in checking a possible monopoly and anti-competitive business practices by several e-commerce organisations.

The reckless and aggressive business model of these companies, including Evaly, has adversely affected the e-commerce equilibrium. The Ministry of Commerce finally came up with an e-commerce policy only in July this year after the media reported mammoth liabilities of Evaly. The Anti Corruption Commission is now also investigating whether the company has laundered money.

Since its inception in December 2018, its business operation has been based on cashback and high discount offers. As part of their intelligent marketing strategy they adopted several measures including, but not limited to, sponsoring popular TV dramas, and affiliating celebrities, youngsters and social media influencers, and large scale advertising in print, electronic and social media.

The e-Commerce Association of Bangladesh (e-CAB) also did not take any steps to protect the interest of the public. e-CAB is a limited company incorporated under the Companies Act of 1994 which has been established to make e-commerce a driving force of the economic growth of Bangladesh.

It aims to improve the e-commerce sector by discharging its activities considering the state policy and overall public interest. Moreover, e-CAB might have thought to stay out of this as Evaly has been their platinum sponsor.

Evaly’s marketing strategy brought them the expected result  within two years of its journey; it had a member base of 4.5 million. Everything seemed to be perfect till August 2020 when a leading daily made a revealing report about Evaly.

It revealed that at the time of beginning its journey, the company had a paid-up capital of Tk50,000, which was later increased to Tk10 million. Despite a monthly turnover of Tk3 billion, the paid-up capital has not increased further. Later some other media also made shocking discoveries about Evaly.

In a bid to overcome the crisis posed by the media reports, Evaly significantly increased its marketing expenditure and celebrity endorsement. The company advertised heavily through several news media outlets in the forms of sponsored articles, interviews, online banners and print advertisements. Celebrities also emerged as their brand ambassadors and public faces of the company.

Evaly was close to stemming the damage by introducing even more lucrative offers. Customers too flocked to the honeycomb. Regulating institutions took no visible steps to tame the boom. From August 2020 to June 2021 Evaly witnessed another bubble growth despite making losses since its inception and widening the gap between its assets and liabilities.

But everything went upside down when Bangladesh Bank sent a report to the Ministry of Commerce in June 2021 that exposed the vulnerable situation of Evaly. A business daily also published an investigative report quoting the findings of the report.

Thereafter, seven ministries and independent regulating institutions decided to conduct their investigations to find out whether Evaly had committed any irregularity and created unhealthy competition.

The case of Evaly and other similar e-commerce platforms is a lesson for everyone. The regulating institutions should act in advance to avoid a disaster. Celebrities and influencers should choose carefully in endorsing a brand, and determine whether they are endorsing a real promise or a possible scam.

Considering its critical role in raising awareness and educating people, the media should think twice while onboarding an advertiser. Last but not the least, consumers must behave responsibly so that they do not become easy prey.

Now that we are living in the age of technology and start-ups, we should be able to predict the future and act in advance for its growth. The e-commerce start-ups must not bear the brunt of uncertainties created by any shady business.

Evaly has made a difference. We hope that Evaly will be able to prove its innocence, continue its business and emerge as a strong e-commerce brand in Bangladesh.

This was first published in the Business Standard on 27 July. Click here to read on the site.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Create a website or blog at WordPress.com

Up ↑

%d bloggers like this: